Customs, Excise and Gold Tribunal - Tamil Nadu
India Nippon Electricals vs Commissioner Of C. Ex. on 9 January, 1997
Equivalent citations: 1997(93)ELT590(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to demand of duty in respect of the goods which are alleged to have been cleared without payment of duty as replacements for the returned goods which were scrapped by the appellants. Longer period of limitation has also been invoked for raising the demand.
2. Shri A. Thiagarajan, learned Counsel for the appellants took us through the order in original and also referred to the show cause notice. He has the following two pleas to make in this regard :
1. Some of the goods which were returned and which have alleged to have been replaced were in fact repaired and returned.
2. Longer period of limitation could not have been invoked.
2. In regard to the first plea he has referred us to the finding of the learned lower authority wherein, he has pleaded, the appellants had taken a plea which has been taken note of by the lower authority that some of the goods which had been returned by the customers under Rule 57F(2) F(3) and Rule 173H of the Central Excise Rules, 1944 were repaired and returned to their customers. He has pleaded that the learned CCE, after taking note of this plea had caused a verification to be done in respect of fly-wheel magnetos and the appellants were also given relief for only Rs. 2 lakhs. He has pleaded that thereafter the learned CCE proceeded to confirm the duty demand for Rs. 12,30,863/- against the demand of Rs. 14,33,525/- mentioned in the show cause notice. He has pleaded that the appellants had given up their plea in respect of the other items and in respect of fly-wheel magnetos they have further elaborated their plea. He has pleaded that this plea of the appellants would be relevant for the limitation point. He has pleaded that while the appellants had received the goods as above from their customers, they had received them with the intention of repairing the same and return the same after repair. But when they found out that certain goods were beyond repair, they could not return the parts of the goods after repair of the same and provided replacements. In regard to limitation he has pleaded that the appellants had no intention to evade payment of duty and they bona fide took the returned goods back for repair and return. He has pleaded that it is the normal practice in the trade to provide replacements in respect of those goods which could not be repaired. He has further pleaded that the appellants had maintained all the records required to be maintained in terms of Rule 57F(2) and (3) Rule 173H. He has pleaded that for the purpose of accountal against entries of the goods received, they had mentioned 'despatched' for the purpose of closing the entries. To a specific query from the bench, as to how the department can be taken to have been informed about the scrapping of the returned parts and replacement of the same and non payment of duty in respect of the goods, which were sent out as replacements and how it can be taken that the appellants had informed the authorities, he has pleaded that the appellants action was bona fide in nature. He has further urged that as it is the learned Collector has not entered any specific finding for invoking the longer period of limitation. In this connection he was asked whether the plea regarding suppression and invokation of longer period of limitation was taken at the time of personal hearing before the lower authority, he fairly conceded that this is not reflected in the submissions made before the lower authority during personal hearing. He pointed out that the appellant in the preliminary reply to the show cause notice urged as under in paras 15 and 16 as under :
15. We submit, as already stated, due to ignorance of procedures, inadvertence and the belief arising out of regular verification by the officers of such cases involving supply of new items, we had, over a long period of time, continued to adopt, what in our view was correct. The very fact that all the relevant details could be gathered from our private records/statutory records establishes beyond doubt that there has been no clandestine activity much less clandestine removal without payment of duty. There has been no deliberate intention on our part in not having accounted such production in RG-1 or in the accounting of the production in a particular manner in RG-1. If only the irregularity had been brought to our notice earlier, there would not have been a need for the issue of the notice.
16. It could be seen that we have treated all receipts for rectification alike, whether such receipts had been is under Rule-57F(2)/Rule-57F(3) or Rule-173H of Central Excise Rules, 1944. However, we have, in the case of receipts under Rule-173H, followed the procedures and filed declaration/maintained Form-V register. This had not been denied in the SCN. It will therefore be incorrect to suggest that there has been any deliberate attempt on our part to evade duty as is being alleged in SCN. In the light of paras (15) & (16) above, neither proviso to Section 11 A(1) of CESA '44 nor penalty under Rule 173Q of Central Excise Rules, 1944 will be attracted.
He has pleaded that the learned lower authority should have entered finding in regard to their pleas made in reply to the show cause notice and for reason of his failure to do so, the lower authority's order is vitiated and cannot be considered as a proper order.
3. Shri S. Murugandi, the learned DR for the department has pleaded that the issue for consideration is whether the appellant had informed the authorities or have come on record in regard to scrapping of the returned materials and substitution of the scrapped materials by new goods which were manufactured in the appellants' factory. He has pleaded that it would have been a different matter if these goods which were substituted were reflected in the RG-1 register. He has pleaded that there is no plea from the appellants that the goods which were sent as replacement were accounted for in the RG-1 register. He has pleaded that if the appellants had acted bona fide, there is no explanation as to why when the statute provides for accountal of the manufactured goods in the register, they did not do so. The appellants obviously held back information from the authorities about the replacement of the goods. He has pleaded that this action on the part of the appellants was with an intention to evade payment of duty. The appellants in the reply to the show cause notice, merely urged that they have followed Rule 57F(2) & (3) and 173H, but they have not addressed, the main issue as to why they had not brought on record the scrapping of the materials and the goods which were supplied as replacement without payment of duty. During the personal hearing the appellant, did not urge any plea in regard to limitation and the lower authority was not called upon to enter any finding in regard to the same. He has pleaded that in the show cause notice, clear allegation has been made in para 12 that the appellants had suppressed fact of production of and clearance of the goods sent out as replacements without payment of duty and there is no rebuttal thereto and therefore longer period of limitation has been rightly invoked.
4. We have considered the pleas made by both the sides. We observe that demand has been made in respect of the goods which were sent out as replacements from the appellants' factory in lieu of the goods which are returned to the appellants by their customers in terms of Rules 57F(2) and (3) and 173H. The issue to be considered is in regard to the replacement which are sent out without payment of duty. Before the lower authority, the appellants have admitted as set out in para 29 of the impugned order that the rectification possibilities were remote in all the items other than fly-wheel magnetos and therefore, they confined their pleas only in respect of fly-wheel magnetos. In regard to other items they offered to pay duty. This clearly goes to show that the only explanation the appellants had was in respect of fly-wheel magnetos. They had no defence in respect of other goods. In respect of this item also the appellants could account for only a small quantity which was shown to have been repaired and returned and they have no evidence in support of the return of the remaining fly-wheel magnetos. The learned lower authority accepted this evidence which was produced and confirmed the demand for the remaining fly-wheel magnetos which were obviously taken to have been replaced and cleared without payment of duty as replacements. In regard to other goods the position stands established that they had sent out the replacements without the payment of duty and this was found out by the authorities on the check done by them. No evidence has been produced before us to show that they accounted for any of these quantities. In this background, therefore, finding that clearances had been made without payment of duty is sustainable and duty has been rightly demanded.
5. In regard to limitation we find as rightly pointed out by the learned DR that appellants failed to come on record about the scrapping of the returned parts and replacements sent out without payment of duty. There is no explanation forthcoming from the appellants as to why they failed to account for in the RG-1 register the quantities which had been sent out as replacement. The appellants have not come on record in regard to the scrapping done and in terms of Rules 57F(2) and (3) and 173H, the appellants are supposed to maintain record in regard to the entry of the goods which were received back and thereafter return of the same. The appellants against the different entries showed 'despatched' i.e. the goods after repairs etc. had been sent out. In fact what they sent out were replacements for the goods scrapped. The entry 'despatched' made was therefore to mislead the authorities into believing that the goods received for repairs etc. had been sent back after repairs etc. The appellants showed in their records that the goods as received were despatched outside the factory when in fact the same had been replaced. In this background, we hold that the appellants held back information from the authorities with an intent to evade payment of duty. The grievance of the appellants is that the lower authority should have entered finding on this plea taken by the appellants. We observe that there is clear allegation in the SCN in para 12 in regard to the replacements but there was no reply from the appellant in regard to the same in the SCN and also during the personal hearing. This obviously shows that the allegations had been accepted by the appellants. The CCE in this background was not required to advert to this when allegations regarding replacements was not at all rebutted in reply. In the circumstances, there is no force in the plea of the appellants in regard to the plea of limitation as urged by them. Taking into consideration the fact that the appellants have paid duty even before the matter was adjudicated we hold that some leniency is called for in the matter of levy of penalty. We therefore hold that ends of justice will be served if the penalty is reduced to Rs. 5,000/- (Rupees five thousand) and we order accordingly. Except for this modification, the appeal is otherwise dismissed.